Impact of violent and property crimes on microfirms’ performance: The Philippine experience

Abstract

Crime creates business uncertainties that can disturb, if not destroy, the already vulnerable business environment. Microfirms, due to their smallness, are more susceptible to the effects of crime as they lack the resources to invest in protection and endure its effects. Many empirical investigations on the subject matter have not yet produced a definite conclusion. Thus, this study is imperative. This study fills the inconclusiveness, vagueness, and mixed evidence of the crimes’ impact on entrepreneurship in the literature. This quantitative research used secondary data consisting of a two-panel micro-level data set with a total of 1,190 observations from 2009 to 2018. The fixed effect and random effect regression models were used to know how crime rates of physical assault, theft, and robbery affect microfirms’ performance, and the causality direction and dynamics were investigated using MWALD Granger causality. The result highlighted the strong evidence depicting the negative effects of crime on microfirms’ performance. A bidirectional causality also runs between microfirms’ performance and crime, but there is a negative impact on both variables in the long run. The findings underscored the importance of multisectoral participation in preventing and mitigating the effect of crimes against persons and property on microfirms and promoting a business-friendly environment.